The eradication of Decision 55 to put an end to subsidies for the garment and textile industry will cause great difficulties for this industry. After 2008 when China will resume its free exports after a period of time of having special defensive policies imposed, the pressure on the Vietnamese garment and textile industry will be much higher.
In 2006, the export of garments and textiles is estimated to increase by some 10 per cent. In 2007, the export increase will stay aground this rate although the quota mechanism is already removed.
The export situation in 2008 is impossible to forecast because China’s garments and textiles are free to enter the US market, a result of the eradication of special defensive measure imposition. At that time, Vietnam’s garments and textiles will have to face a new unequal struggle against Chinese products in the US market. This is a judgement of Vietnam Garment and Textile Association’s Chairman Le Quoc An.
According to Mr An, in spite of the high possibility of Vietnam’s accession to the WTO by the end of this year and its enjoyment of non-quota mechanism, its garment and textile export growth into the US cannot exceed 10 per cent a year in the next two years.
Retrospectively, in 2001, the garment and textile export revenue to the US was only a few million US dollars but it reached US$900 million in 2002, US$1.7 billion in 2003, US$2.4 billion in 2004 and US$2.6 billion in 2005. The growth rate is clearly on the downward trend.
Notably, the export growth of Vietnam’s garment and textile industry depends heavily on the movements of China’s market.
For example, in the first nine months of 2005, the export growth of Vietnam’s garment and textile industry was a minus digit compared with the same period of the year earlier. This was because China hadn’t had quotas imposed on its export products into the US market as the former had joined the WTO. But after that, the US subjected defensive measures on 28 categories of Chinese garments and textiles until 2008, the export growth of Vietnam into the US revived in the remaining months of that year.
According to the statistics, in 2005, Vietnamese garments and textiles accounted for 3.2 per cent of the US garment and textile import volume while those of China made up 25 per cent.
This is also the case for the EU market. When China entered the WTO, the EU also lifted export quotas imposed on Vietnam. However, the export growth into this market was also minus in the first nine months of 2005. Only until China imposed defensive measures by the EU, the export of Vietnam’s garments and textiles to this market bounced back. The export growth rate in 2005 eventually reached 15 per cent.
Mr. An confessed that the situation might be even worse after 2008 because China will be allowed to resume its free export. Hence, the Vietnamese garment and textile industry will suffer higher pressures.
One of the conditions the US brought forward in the WTO entry negotiations with Vietnam was that Vietnam must completely eliminate subsidies for the garment and textile industry. Accordingly, all preferential treatments to the textile industry (of all economic sectors) provided in the Decision 55 signed by the Prime Minister in 2001 will be brought to an end.
In fact, preferential treatments in the Decision 55 are not many. First, the textile industry has access to preferential loans from the Development Assistance Fund to carry out its development investment projects from 2001. After four years, the total loan from the Development Assistance Fund was only US$118 million, or VND1,900 billion.
Second, preferential treatments are focused on trade promotion activities. According to the Decision 55, the Government use a part of quota fees for export promotion activities of the textile sector. In fact, after four years, the quota fee totalled VND290 billion but the expenditure for trade promotion activities from this fund was only about VND19 billion (US$1.2 million), or less than 10 per cent.
As for the export achievement bonus for outstanding enterprises, the total reward in the last four years was only about VND8 billion. According to Mr. An, the premium is too little.
Although the preferential treatments are few, the removal of the Decision 55 will have impacts on textile and dyeing industries because textile projects need huge investment capital and incentives. Furthermore, investments in the textile industry also include investments in the dyeing industry and water treatment.
The ending of preferential loans will also cause more difficulties to the textile industry. At present, the textile industry is growing sluggishly in comparison with the garment industry. A majority of total 27 weaving enterprises are encountering hardships in capital and market, especially many enterprises are incurring huge losses due to bad quality products are on the verge of bankruptcy.
When Vietnam enters the WTO, import tariffs on textile fabrics will be reduced to 5-15 per cent instead of the current 40-50 per cent. Then, the textile industry will bear more hardships. Although Vietnam import up to 70 per cent of material for the garment industry, the domestic textile industry will be unable to stand firmly on the market without preferential loans.
According to experts, many textile firms will go bankrupt when Vietnam joins the WTO if they lack solutions to overcome these hardships.
P.V
Vietnamese
